Martin Shipton analyses the prospect for Wales's beleaguered manufacturing industry after the news that LG is to lay off 870 workers

AS recriminations continue over the failure of Wales's biggest inward investment project, it seems the likelihood of our securing a similar sized project in the future is virtually zero.

According to one of Wales's leading economic development experts, it is China not Wales where multinational companies see the best future opportunities.

Kevin Morgan, professor of European regional development at Cardiff University, said he thought there was no chance of an LG-style inward investment project ever coming to Wales again.

"I know it's only a few years ago, but my God 1996 is another galaxy in terms of the thinking about locational economics", he said.

"If a company was thinking of establishing something like the ill-fated LG plant today, they would be looking at central or eastern Europe or even more likely the Pearl River Delta and Yangtse River Delta in southern China. These are two areas where the Chinese are literally rewriting the textbooks on economic development.

"They are sucking in low-value, price-sensitive manufacturing from around the world. No-one can compete with it, because they are sucking in a ready supply of low-cost labour from the crisis-hit agricultural areas nearby."

A combination of factors is responsible for this revolutionary change which makes another LG project unlikely in Wales. There has been a considerable amount of deregulation on an international basis, we are facing EU enlargement and there are ever greater cost pressures because of globalisation.

Prof Morgan said, "The Chinese have really got their act together. It may be a communist country, but in southern China they have created new economic areas very similar to Hong Kong.

"In Wales I can't see there ever being a situation where a single company would be offered &#xA3;200m to bring a project in. What happened occurred under the pre-devolution Welsh Office regime. There is an entirely different and, in my view, correct approach in operation since the National Assembly was established. There is now more parity of esteem given to the competing claims of inward investment and indigenous investment.

"If a real cost-benefit analysis were done, I think we would find that some of the money spent on FDI (foreign direct investment) did not provide good value. In many ways a more important measure of success than the levels of straightforward investment is the level of return investment, where companies put more money in than just the initial sum.

"This is what WDA overseas sales people are looking for, and repeat rounds of investment represent a much bigger vote of confidence in Wales than a one-off.

"I have always thought, by the way, that the best inward investment ever attracted to Wales was the Sony plant at Bridgend.

"So far as the future is concerned, I think we have to be pragmatic. The time for really big new FDI has probably passed and with that knowledge the Assembly's parity of esteem for indigenous investment is the right strategy.

"What we need to do is hold on to what we've got and try to get the companies involved to improve their product mandate. It beggars belief that LGPD continued to produce the same kinds of appliance and did not upgrade. Successful companies constantly seek to upgrade the quality of their products.

"Another thing we have to do is improve the links between business and higher education. Despite some worthwhile initiatives, we still have two distinct cultures that largely do not recognise each other."

Despite the major blow of LGPD's closure, latest figures from the WDA show encouraging levels of repeat investment. Of the &#xA3;616.6m invested in Wales from elsewhere in the UK and overseas during the financial year that ended on March 31, &#xA3;348.89m represented expansion projects.

Meanwhile the fallout from the LG closure announcement continued. Plaid Cymru's Shadow Economic Development Minister Elin Jones urged the Welsh Assembly Government to open the books on LG and reveal exactly how much money was invested in the failed venture.

She said, "What has been the real cost of the LG project to the Welsh taxpayer? A project which, six years after its launch, only employs 250 people in Newport? How much public-sector money, from the WDA, Welsh Office or the Welsh Assembly Government was invested in the LG Project - whether LG Semicon, LG Philips or LG Electronics? &#xA3;247m was initially on offer to the LG project in 1997: we now need to know how much of this money has actually been spent on LG.

"Andrew Davies, the Economic Development Minister, must not hide behind commercial confidentiality, choosing to protect the interest of a multinational company over the interest of democratic accountability.

"His duty now is to be open and transparent to the people of Wales, to enable the lessons of the LG experience to be learnt."

Mr Davies said, "It is nonsense to say that commercial confidentiality is being used to protect the interests of a multinational company. Without the trust of companies, both multinational and indigenous, we would not be as successful as we are with supporting businesses in Wales."